Oil dropped to a three-week low amid concern Greece’s failure to reach a deal with international creditors will prompt its exit from the euro area.

Global equities fell as the Greek government imposed capital controls and shut banks. Diplomats in Vienna are close toclinching a deal to curb Iran’s nuclear program as a June 30 deadline looms, according to Federica Mogherini, the European Union’s foreign policy chief.

Oil is heading for its first monthly decline in New York since March as the Greek crisis deepens. Crude’s 11 percent advance this year has encouraged U.S. producers and OPEC’s biggest members to pump at a record pace, signaling a global glut may persist.

“Today’s move is all about the Greek situation,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “Investors are trying to sort it all out and react accordingly. We’re going to see episodes of intense selling until there’s a resolution.”

West Texas Intermediate for August delivery fell 97 cents, or 1.6 percent, to $58.66 a barrel at 10:28 a.m. on the New York Mercantile Exchange. Futures touched $58.04, the lowest since June 8. Prices have dropped 2.7 percent this month.

Shuttered Banks

Brent for August settlement decreased $1.15, or 1.8 percent, to $62.11 a barrel on the London-based ICE Futures Europe exchange. Futures reached $61.35, the least since June 5. Prices are down 5.3 percent in June. The European benchmark grade traded at a $3.45 premium to WTI.

Greece ordered banks to be closed until at least July 6, with a daily limit on cash withdrawals, according to a government decree. Just days before the June 30 expiry of the current bailout and a $1.7 billion payment due to the International Monetary Fund, Prime Minister Alexis Tsipras on Friday called for a July 5 referendum on creditor demands.

Sustained U.S. job gains have helped bolster the dollar this year. The Labor Department is set to report June employment figures on July 2.

“Clearly, the increase in risk aversion and a strong dollar are bearish for crude oil.” Mike Wittner, head of oil research at Societe Generale SA in New York, said by phone. “The dollar is already gaining strength because of Greece and may get another boost later this week when the June jobless data is released.”

Iran Talks

Diplomats from Iran and six world powers have shown the “political will” to finish drafting a long-term accord to limit the Persian Gulf nation’s nuclear activities, Mogherini told reporters Sunday after discussions with U.S. Secretary of State John Kerry and Iranian Foreign Minister Mohammad Javad Zarif.

Ministers from the six world powers — the U.S., U.K., France, Germany, China and Russia — will meet their Iranian counterpart again in Vienna once a deal has been drafted, Mogherini said.

“The market is also paying attention to the Iran talks,” Wittner said. “Any additional supply shouldn’t be a factor until next year, but an agreement would have a major impact on market sentiment.”

Iran has estimated it could double oil exports from about 1 million barrels a day within six months of international sanctions being lifted. It’s currently the fifth-largest producer in the Organization of Petroleum Exporting Countries.

Hedge funds were the least bullish on WTI in 10 weeks, cutting their net-long wagers by 1.3 percent through June 23, U.S. Commodity Futures Trading Commission data showed. Money managers reduced net-long positions in Brent by 1.5 percent to during the same period, ICE Futures Europe data show.

 

Source: Bloomberg